As the world’s largest oil producer Saudi Arabia holds an immense amount of potential as it builds a broad-based economy and continues to liberalise and modernise its business climate, a private equity leader told participants at a conference in Riyadh, Saudi Arabia.
Ahmed Heikal, founder and chairman of Citadel Capital, a private equity firm in the Middle East and Africa, said: “Our firm has long attracted private equity funds from the Riyadh, but today we are actively studying potential investments in Saudi Arabia.”
Heikal was a participant at the Fifth Annual Euromoney Saudi Arabia Conference held in Riyadh on 18-19 May 2010.
The conference brought together figures from government, finance and business who engaged in a fruitful dialogue about the new financial landscape that has begun to take shape in the kingdom as well as specific market opportunities that have come about as a result of efforts to liberalize and diversify the economy.
“Saudi Arabia has long been on the private equity map as a source of funding, but today it has also become a very attractive investment destination,” said Heikal. “This is an ideal time to explore opportunities as this dynamic economy opens up and foreign ownership restrictions begin to ease. Private equity investors who take a longer investment horizon can thus capture lower valuations today ahead of what we expect will be surging global interest.”
He also pointed out that as the Saudi economy diversifies away from oil, new opportunities will become available for private sector players beyond the country’s traditional investment driver. Saudi Arabia’s latest budget, with projected spending of SAR540bn, is its largest ever, and has a project pipeline worth more than USD692bn widely distributed across construction, petrochemical, oil and gas, infrastructure and power projects.
“Private equity looks for many of the investment themes that are currently developing in the Saudi market: underserved domestic demand, regional competitive advantages and deregulation. Demographic appeal also factors as a significant support to private investment in Saudi Arabia. With a population of more than 25 million growing at an average rate of 2.2 per cent over the past decade, domestic demand and spending are rising rapidly, and consumers are under-leveraged by both regional and global standards,” said Heikal.
Private equity activity in the Middle East and North Africa has largely been dominated by Egypt, which attracted 24 per cent of industry investments by value in 2009 (excluding Citadel Capital’s USD1bn investment in Egyptian Refining), according to industry data. Saudi Arabia, long the region’s largest economy and the world’s largest oil producer, attracted a 17 per cent share of Mena private equity investments.
